Our education system, media and government have between them done a bang-up job of making sure that the masses are devoid of the most fundamental economic premises in existence. This is what has led people to accept such absurd concepts as “government money” and the myth that governments can somehow create prosperity.
I believe the root of the misunderstanding is that hardly anyone is aware that money is not wealth, that wealth consists of material “things,” not pieces of paper.
You can print all the money you like, it does not represent a single grain of wealth above and beyond the material value of the paper and the ink which is printed upon it. To create wealth, you need to create things which are of value to humans.
There are many symptoms of the belief in the fallacy that paper money equals wealth. One such symptom is the widespread belief that unions have been responsible for improving our standards of living throughout history, by fighting for higher wages.
At the root of this fallacy is the ignorance of the difference between nominal and real wages. Nominal wages are the absolute numerical quantity of money that we earn. Real wages are a measure of how much we can buy with our earnings.
All unions have ever done is to make worthless increases in nominal wages – and they’ve done it by force and blackmail. Since labor costs come from revenues and not profits, the only way in which unions have gained increases in nominal wage levels is by forcing a rise in consumer prices. You can raise nominal wage levels all you like – if the same raises are accompanied by price rises then our real wage levels, and hence our prosperity, stays the same.
The ONLY way to increase real wage levels is by producing more wealth. More generally, the only way to increase prosperity is to produce more wealth. This can only be done by increasing the productivity of the worker by way of technological improvements in the means of production. In fact this is the ONLY way in which general prosperity has risen in history. Unions have had absolutely nothing to do with this process whatsoever. Neither have governments.
Economic ignorance such as this lead to the kind of misconceptions in which people imagine “money” to be this naturally occurring resource which the government keeps locked in a giant vault somewhere, to which only politicians have the key. Their measure of value in a politician is the degree to which he or she “distributes” this money.
Of course all of this ignorance could be eradicated if we had an education system which wasn’t dominated the anticapitalist left. For the results of this education system, just go read the comments accompanying any article about economics on the Huffington Post.
